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North Dakota's Oil Patch 'busting at the seams'

BISMARCK – North Dakota’s Oil Patch is growing and changing so rapidly, Gov. Jack Dalrymple announced Friday he has started meeting with city and county officials to better understand the challenges facing local governments whose needs state lawmakers tried to address just six months ago.

For Williston Mayor Ward Koeser, the tipping point came during a recent budget hearing as the city was preparing to send out notices about property valuation increases while still borrowing $105 million just to operate for the next two years, he said.

“I thought, something’s wrong with this picture, with most state funds flush with money and local communities having to borrow money just to get by,” Koeser said.

The Legislature approved a record $2.5 billion last spring to address the needs of rapidly growing Oil Patch communities, including $60 million in oil impact funds to help Williston pay off its bonds.

But Koeser said Williston still must cover $45 million with revenue from a 1 percent sales tax that expires in 2020, while also trying to pay for additional police, water projects and other needs that have accompanied the city’s growth.

The city has expanded from about 14,700 people in 2010 to an estimated 20,000 to 25,000 permanent residents today, with a service population of 45,000 people.

Koeser said that while the state’s help is appreciated, “The money coming back, because of the changing dynamics of what’s going on out here, is just not meeting those needs.”

He and Williston City Commissioner Brad Bekkedahl shared their concerns during a meeting Tuesday with Dalrymple in the governor’s office.

“My argument to him was we need to just look at things differently,” Koeser said.

Creating new challenges

The meeting was one of several Dalrymple has held or is planning to hold with city and county officials from the Oil Patch. He already has met with City Commission President Dennis Johnson of Dickinson, where city officials permitted $260 million in building projects through September, about $46 million more than at the same time last year, according to the governor’s office.

Dalrymple noted that the $2.5 billion approved by the Legislature last session is more than twice the amount appropriated in 2011 and includes assistance for counties, cities, school districts, townships, law enforcement agencies, critical access hospitals, airports, emergency responders and other public services. More than $522 million was targeted to rapidly growing cities in the first three months of the current biennium, which started July 1, according to a news release from the governor’s office.

However, since the legislative session ended in May, major shifts in the locations of oil and gas development and increased growth in production “are magnifying existing challenges and creating new ones” in the Oil Patch, the release stated.

North Dakota is the nation’s second-leading oil producer behind Texas.

North Dakota had 9,248 wells producing oil in August, an 88 percent increase from three years earlier.

Daily oil production averaged 911,496 barrels, up 176 percent from August 2010, according to the Department of Mineral Resources.

From May to August, the number of oil-producing wells in North Dakota jumped by 582, or 6.7 percent, and average daily production increased by nearly 100,000 barrels.

Rapidly outdated

In Watford City, Mayor Brent Sanford has watched the city’s population explode from 1,744 residents counted in the 2010 census to an estimated 6,500 people today, not including the 5,000 to 10,000 people who live on the city’s outskirts in campers, mobile homes and man camps, he said.

City officials estimate they need $280 million for water, sewer, streets and other infrastructure to meet the needs of a projected population of 7,500, Sanford said, adding that the figure doesn’t include $150 million needed for new school and hospital facilities.

The state Board of University and School Lands awarded $12.3 million in grants in July for Watford City to expand its wastewater treatment system, but the funding requested by the city was for a system to serve a projected population of about 5,000 residents, so it’s already outdated.

“The fabric of our society is just expanding rapidly. It’s just bursting at the seams,” Sanford said.

The intensity of oil production in McKenzie County, which produced more than a quarter of the state’s oil in August, has stressed local resources and highlighted the need for more state help, Sanford said.

“It’s gotta happen in a hurry,” he said.

City officials have been trying to get the word out about how many hundreds of millions of dollars it will take to expand Watford City to serve those working in the oilfields, Sanford said, and he sees the governor’s meetings as a positive sign.

Dalrymple, Department of Transportation Director Grant Levi and Department of Commerce Commissioner Al Anderson are scheduled to meet with Sanford next week about emerging needs.

“I think what we’re seeing … is the understanding that it’s a little bit different for Williston and Watford City when you’re in the epicenter of this,” Sanford said.

Readers can reach Forum News Service reporter Mike Nowatzki at (701) 255-5607 or by email at mnowatzki@forumcomm.com.